Gas up: We could be just one disaster away from $4 fuel

McALLEN — The price of gas has little effect on Edgar Mendoza’s driving habits, only his pocketbook.

Whether gas is $2, $3 or even $4 a gallon, he still has to fill his tank up to get between home in Mission, South Texas College in McAllen and work at the Teleperformance call center in Edinburg.

“If I could, I would change it back to $1.99 a gallon,” Mendoza said. “But I can’t drive less and we all have families to take care of.”

It is a problem facing families all over the Rio Grande Valley as gasoline prices approach all-time highs.

The national average for gas was $3.03 cents last week, according to AAA-Texas, an increase of a nickel over the previous week.

During the last two years, $2 for a gallon of gasoline has been a winter luxury and $3 for a gallon is now a summer inevitability.

Now, as gas prices steadily climb in anticipation of holiday peaks in demand, there are some whispers that drivers are headed toward paying $4 a gallon.

Gas prices are so high because of the usual pre-summer factors — an increase in demand and refineries switching over from heating oil to gasoline, said Ron Planting, an economist for the American Petroleum Institute.

Also, dwindling supplies and a consistently high price for crude oil is pushing gas near records.

“We have $3.03 for a gallon now and a year ago it was $2.90 cents,” Planting said. “It’s partly because demand is stronger.”

The current prices are only pennies away from the all-time national high of $3.05 cents after Hurricane Katrina ravaged Gulf Coast refineries in 2005.

Today in some parts of the country, including the West Coast, gas prices are already are approaching the $4 line even weeks before Memorial Day, without any major events that would increase prices.

Does that mean $4 a gallon gas in the Valley is a sure bet?

Most energy experts and even the federal government say no, so long as there is no major event that causes prices to spike.

In a report released last week by the U.S. Energy Information Administration, analysts expect prices to peak in May before dropping back below $3 a gallon in June and July.

“This projection assumes no significant unplanned refinery outages or crude oil losses,” the report said.

Experts say gasoline prices have peaked and should drop by a few cents in June and July.

“I don’t think it’s going to hit $4. Maybe only in the big cities or the states where the gas taxes are high,” said Peter Clark, an oil market expert and professor of chemical engineering at the University of Alabama.

“Assuming nothing else goes wrong in the summer time, the price ought to level off,” he said.

So far this year the nation has been devoid of the natural disasters and international tensions that can cause sudden spikes in gasoline prices, but recent years show that major events can have a drastic effect on the fragile oil market. In 2005, for example, Hurricane Katrina and Gulf Coast refinery outages caused gasoline prices to surge more than 35 cents in just one week.

A gas reprieve may actually be in store for Texans, though.

Last week, the Texas House of Representatives approved a bill to suspend the state’s gasoline tax during the summer months. The state tacks on 20 cents in taxes on every gallon of gas sold to pay for roads projects.

That proposal is now up for approval in the Texas Senate.

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Kyle Arnold covers business, the economy and general assignments for The Monitor. You can reach him at (956) 683-4410. For this and ore on local stories, visit www.themonitor.com.